After yesterday’s long article about the Big Three and their Big Problems, Scott wrote a thoughtful response.
There were a couple of common misperceptions in there regarding SUVs, though. In particular, the misperception that because oil was cheap in the ’90s that boosted the SUV boom.
While the fuel prices have certainly had a major effect on the auto industry, it wasn’t cheap gas that sparked the SUV craze that lead to the single-minded corporate focus on those huge trucks.
It was John Denver.
A semi-brief history of the SUV:
In the ’60s there was a surge in ownership of Toyota Land Cruisers, AMC Jeeps, and Land Rovers. At the time there were no market incentives for buying these light-duty trucks. People in rural areas simply discovered their practicality. (So many Land Cruiser stories I could tell right here….)
But that growing popularity wasn’t just in rural areas. Upclass New Yorkers (in particular) were purchasing them as well. Being outdoorsy was becoming quite popular with a new interest in mountaineering, caving, rafting, etc., really coming into its own. In fact, the early ’70s is considered a high-water mark for a lot of those rugged outdoors activities.
This can be typified by John Denver’s Rocky Mountain High, which hit #9 in 1973. Danner and Raichle hiking boots were becoming shoes not just for campers and climbers, but for regular folks much as today with wearing Timberlands to go to the grocery store. The outdoor look and lifestyle was in.
This might seem like a minor point of interest, but in reality it was a major turning point for the industry. AMC was on the brink of disaster. Their cars, quite simply, stank. The only hope they had was the Pacer, and we know what happened there.
But one thing was starting to change at AMC. Out of nowhere, the Jeep started to sell like crazy. At the time you didn’t buy Jeeps from an AMC dealership, but rather from gas stations (seriously). So AMC decided to market the hell out of the Jeep to latch on to this new culture, and to start making them a focal point in their showrooms.
At the same time, AMC was looking for Federal help. Even with the uptick in Jeep sales, AMC was headed for disaster. So, they asked the Feds to reclassify the Jeep as a truck. This helped them avoid a number of emissions and safety regulations.
And then it hit.
Jeep sales frickin’ took off in one of the best cases of serendipity in the auto industry.
Ford, who had already noticed what was happening, took the opportunity to revitalize the Bronco. GM built the Jimmy and then the Blazer. International Harvester repackaged the good yet awful Scout into the gooder and awfuller Scout II.
These trucks were becoming the hip vehicle to be seen in. No one realized that part of their ruggedness was due to tax incentives and a lack of safety and emissions regulations.
Anyway, a lot more happened after that including AMC suckering the Government into creating a regulation that effectively brought an end to the Toyota Land Cruiser FJ-40 in the US. Jerks.
But the basic trend that started there continued. Trucks could continue to be built at a low cost because of their lack of development. Nearly all remained body-on-frame with cart springs until the mid-size SUVs started coming out.
So the price of gas wasn’t really a factor in the popularity and success of the SUV. Though it certainly helped prolong the life of the SUV craze, it’s not what really started it. A combination of lobbying, Federal handouts, and latching onto trends is really what happened.
That takes care of the fuel-prices/SUV relationship. But the other misconception is that the Big Three have been completely technologically backwards.
But as far as being advanced, the truth is quite shocking.
In 1993, the Partnership for a New Generation of Vehicles (PNGV), a Federally sponsored program, was initiated to help the auto industry produce high mpg cars.
GM, Ford, and Chrysler were well ahead of the curve when it came to producing hybrids. Each had developed 72mpg+ diesel hybrids along with a number of other advancements (carbon foam, clean diesel technology, hydrogen conversion technologies, and so on).
Then, in 2001, the Bush Administration cancelled the program at the request because, basically, the industry said "it’s too hard." Admittedly, part of the problem was Federal stupidity in that the Big 3 were targeting diesel while at the same time the Feds were implementing tons more restrictions on diesel, effectively killing diesel in the US market.
But even with that, the industry had the ability to beat Toyota to market. And they certainly had the lobbying clout to keep the new diesel restrictions for affecting the consumer car market.
So why didn’t it happen? The exact reasons I mentioned in the previous article played a major part. Shareholders didn’t see the value in a low margin car like the PNGVs. Management had to keep the shareholders happy, nor did they have the technical expertise to understand the value of these vehicles. And unions certainly feared new technology–how much do you pay a fuel cell specialist? And does adding this new technology mean that the old guard of fabricators will lose their jobs?
Yr fthfl bddy,
Mike
But, I always “wrong” thoughtful responses!
Hmmm…I’m hoping that’s just a typo on your part…
While the concept and development of the SUV obviously isn’t new, my point is there’s a direct correlation between SUV production and popularity while there was a glut of available oil supplies in the 90s (i.e., a history lesson doesn’t trump sales numbers). The automakers (U.S. and foreign) flooded the market with all types of SUVs and continued their development and production instead of putting more effort into designing and selling smaller and more efficient vehicles or researching alternative fuels and technologies (which in turn would have cut into profits).
So why didn’t it happen? The exact reasons I mentioned in the previous article played a major part. Shareholders didn’t see the value in a low margin car like the PNGVs. Management had to keep the shareholders happy, nor did they have the technical expertise to understand the value of these vehicles.
In essence, we’re in agreement about the effect, just not the causes (which isn’t saying one of us is wrong or right, but perhaps a mix of some or all stated causes contributing to the result). The bottom line is that significantly changing an enitre industry, market and infrastructure from products with on an oil-based fuel source to alternative power sources is severely hindered because profits won’t be as high compared to the continued building of traditional vehicles. Shareholders don’t want lower profits because of the higher overhead associated with R&D for new technologies and consumers are hesitant to pay higher prices in the short term for new technology vehicles despite prices lowering on them in the long term (though the introduction of DVDs into the entertainment market showed that consumers were willing to pay higher prices on less costly “big item” products – DVD players – which eventually dropped in price when they became the established standard).
Basically greed (reinforced by politics) trumps common sense.
Re: But, I always “wrong” thoughtful responses!
Whoops!
Corrected it. The good news is that it wasn’t a Freudian slip, it was the result of multiple changes to the sentence. I originally wrote something like, “Scott blah blah, but a few points were wrong.” But you weren’t really wrong, so I changed the sentence, and accidentally left wrong instead of wrote.
The thing is, the oil prices really weren’t a contributing -cause- of the SUV boom. What they did was prolong the boom by not providing a compelling reason to stop producing SUVs. I don’t have the numbers handy, but SUVs were the only type of vehicle to follow a consistently rising trend since the ’60s.
Other types of vehicles do wax and wane as a result of fuel prices (compacts, scooters) but the SUV was fuel-price proof.
As a case in point, the oil crisis of the ’70s brought an absolute end to the muscle car era. Yet, SUVs were continuing to rise in sales even though their fuel economy was equivalent.
You can look again at the late ’70s and early ’80s when compact cars had a huge surge. The CVCC-engined Civic, relaunched FWD Corolla, and others became the dominant cars on the market. Even BMW and Mercedes got into the game with the 330e and, shoot, that little Merc. So fuel economy was a major factor in purchaser’s decisions at that time, yet SUVs were continuing to gain traction.
I’ll see if I can find that trend chart at some point. It’s pretty interesting.
Anyway, back to work. (Got a call with India in an hour.)
– Mike
Re: But, I always “wrong” thoughtful responses!
Hmmmm…are there any trend charts about overall oil prices compared to car sales? I have a very hard time believing there’s no real correlation between oil prices and certain types of car sales.
Re: But, I always “wrong” thoughtful responses!
Yes, those trend charts are around. The ones I’ve seen are broken down by body style, so you lose some information. For instance, a four-door sedan includes both Camrys and Merc AMG 55s.
But, I think you’re extrapolating a bit too much from what I’ve said. SUV sales did not trend with fuel prices until recently–hence part of the reason why automakers were keen on them. However, compacts absolutely trend with fuel prices.
The important thing, though, is that fuel economy is only one part of the buyer’s decision, and that concern is what fluctuates with fuel prices.
For instance, the big Mercs are doing pretty good sales right now while getting appalling fuel economy. Same goes for exotics, though, that’s a pretty different sort of buyer.
Thing is, most SUVs did not have appreciably different fuel economy from large sedans. The Sebring, for instance, got something like 18/21. An Explorer gets only one MPG less, if I recall correctly.
If you went looking for “a vehicle” and compared the two, you’d probably purchase the Explorer. It’s roomier, has better winter capabilities, is comfortable, and “feels” safer (even though it’s not).
And price is a big factor here as well. For roughly the same price as a car you got a significantly larger vehicle.
The proof here is in minivans. Minivans got comparable or better fuel economy than their sedan counterparts. At first they sold like crazy, but then the stigma of “mommy wagon” got stuck to them. On the other hand, an SUV gives you much the same practicality, has acceptably lower fuel economy, and is more socially acceptable.
Perhaps some of the blame should go toward the designers of sedans. At one point you could get in any sedan wearing a hat. There are plenty of shots of guys in fedoras driving Pontiac Chiefs and Buick Roadmasters–the end of the hat-in-a-car era. Maybe if sedans had remained big we wouldn’t have had the SUV boom.
But anyway, this is getting slightly beyond the point. SUVs aren’t to blame for this whole thing anyway. There were plenty of other stupid decisions made by the Big Three.
Okay, time to stop.
– Mike
Re: But, I always “wrong” thoughtful responses!
But anyway, this is getting slightly beyond the point. SUVs aren’t to blame for this whole thing anyway. There were plenty of other stupid decisions made by the Big Three.
I agree with that.
I’m also trying to figure out if there’s a strong association between oil prices/supply and automobile marketing. SUVs seemed like a good example (not really to blame).
Re: But, I always “wrong” thoughtful responses!
I can’t find that trend chart. It might have been in a book, actually. But at some point (because I’m curious), I’m going to see if I can find a set of trends for auto sales by year. It’ll be easy to overlay that with oil prices.
Oh, hopefully I’m not being (too much of) a joykiller about the post. I did laugh muchly about blaming John Denver…
I drive a Jetta TDI now, and I drove it cross country on only 3 tanks of gas due to getting close to 60 mpg on the highway, that’s way better than a hybrid.
I often wonder why anyone really ‘cares’ about American car industry. I mean jobs aside, no one seemed to complain when computers moved overseas, or TVs, radios and other “major” industries. No one cares that there is practically zero industries that were cradled in the US that are still being made in the US. We’re not producers, we’re inventors.
Truth is, it seems like America likes to invent things and then pay poor people in countries without labor laws to make it for us. So what’s so different about cars?
Hey Steve,
Well, one of the reasons to care about the American car industry is highlighted in your story about driving a Jetta TDI.
The Big Three are also leaders in diesel engines. Just not in America.
For instance, of the 106 different model styles of Ford Focus sold in the UK, only 51 of those are gasoline engined. That same balance holds true for the other models made by GM and Ford foreign brands. (Chrysler is a purely stateside company, barring some remaining Mercedes stock.)
Additionally, the American auto industry encompasses a heckuva lot more than just producing light vehicles.
Some examples:
Ford owns Detroit Diesel, the second largest manufacturer of diesel engines. These are used simply everwhere. Not only are they in big rigs, but they’re also in cranes, oil rigs, and even the backup power generators for commercial office buildings.
Federal Mogul is partially owned by GM. Aside from producing engine and brake parts for GM, they also produce brakes for Fiat, lighting for all the Japanese brands, parts for French brands, parts for the Space Shuttle, and who knows what else.
Toyota uses AC Delco parts as do the foreign brands of GM and Ford.
Ford owns Mazda. Ford owns Volvo. GM, on the other hand, owns Vauxhall, Opel, Holden, Saab in addition to the brands we’re familiar with here. They also still own a large interest in Fiat, and Kia (I think).
So, there are plenty of reasons why the Big Three make a difference on the global economy. Even Toyota went to the government and asked them to help with a bailout.
I’ve got another article in my little brain, though, about this. The nutshell: GM and Ford need to sell off their assets. (GM’s already doing this with AC Delco, fortunately.)
Oh, and when it comes to inventing things car-related? We didn’t. The French did just about all of the inventing, followed by the Brits, then the Germans, then us. In fact, I’m struggling to think of one American invention in the car world.
Fins.
– Mike
Thanks for correcting me. Somehow I had thought that Ford and Olds were the inventors of the automobile, but they were just the ones that made production and assembly lines for them.
Weight trends from ’75 – ’08
If anyone’s interested, I found this study from the EPA regarding the weights of vehicles and fuel economy from ’75 to ’08:
http://www.epa.gov/otaq/fetrends.htm
The interesting thing is how much heavier cars have gotten (mostly due to safety regulations) and how fuel economy got better up until about ’88, and then started to decline.
There were a bunch of cars in the ’80s that got about 50mpg. Though, they didn’t have the safety features or amenities of today’s cars.
That, by the way, is the reason the Tata $2500 car can’t be sold in America.
– Mike
Re: Weight trends from ’75 – ’08
Thank you for confirming what I’ve been noticing for some time.
I remember seeing a commercial for a car (can’t remember which one), but it was proudly touting its 21mpg highway rating.
It sort of brought me up short.
I remember a time when it was sort of a given that most cars were able to get above 20mpg highway. In fact, something with that kind of rating would be considered particularly low.
Meanwhile, my mother and stepfather bought an F-250 to haul their RV, and the thing gets 8mpg highway while towing.
Understandable, but…yeesh.
American Auto Inventions
The self adjusting clock
Re: American Auto Inventions
Huh?
I did find one: Windshield wipers.
So, that’s nice.
SUV’s and the demise of American Cars
I can understand why you don’t blame SUV’s for the situation that we’re in now with the American automakers, but I believe that in some ways, you’re wrong not to.
“Working” vehicles tend to be fuel price independent; if you need a truck to work, you’re going to get a truck. SUV’s, because of their popularity, pushed other ‘useful’ vehicles out of production, and became one of a very small number of vehicles that could do any sort of work. If you, like me, sometimes find yourself hauling heavy/bulky things around, you need a ‘daily driver’ that can meet those needs. Other than a mini-van, your options are limited to SUV’s.
So we grew into a market where your options for a non-SUV ‘useful’ vehicle are very, very limited.
I agree that management was responding to their shareholder’s desires for profits, but the way they did it – SUV’s – is a large part of the problem.
Re: SUV’s and the demise of American Cars
I think I need to clarify a point here: SUVs aren’t the problem, they’re the result of the other problems that have caused the collapse.
This finer point is pretty important, I believe, because any sort of high-margin vehicle would’ve provided the same result. It just so happens that SUVs were the high-margin vehicle of choice.
You’re certainly right that a useful vehicle is purchased for its utility, if you need that utility. For instance, if I need the utility of a light high-powered sports car for club racing, I’m going to get a Caterham (oh, if only). If I need a vehicle that can haul a welder, panels of steel, and all the other accoutrements of being a roving welder, I’m going to get an F-350 chassis bed.
But here’s the thing, do we really need our “daily driver” to be capable of hauling 4x8s? If you haul 4x8s twice a year, it’s still cheaper to rent a truck to do that than pay the cost of hauling around all of the body work, suspension, and engine at other times.
Or do we need a vehicle that can carry 8 passengers when the only day a year you carry that many friends and family is Thanksgiving?
Honestly, this is part of the reason you and I ride motorcycles.
My daily ride (at least, when I had one) was going downtown with a laptop. I can either bring enough engine and vehicle to carry me, the laptop, and potentially one other person via the bike, or I can bring enough engine and vehicle to carry me, the laptop, four other passengers, and another 15 cubic feet of cargo.
– Mike
Re: SUV’s and the demise of American Cars
Another great point.
Also, your point about station wagons being replaced by minivans being replaced by SUVs is a good one.
It seems like there’s some sort of stigma that I think has only been around since the 80’s that family car=bad. Not sure why. At a purely prejudicial guess, I’d say it’s people trying to overcome the perception of age.
In any case, the funny part is that these trends are all around the need for people to carry around several car seats, strollers, etc., and then also carry around children, sports equipment or whatever. And that need doesn’t go away. So each time a different vehicle comes to replace the next, it has the exact same basic characteristics (ability to haul several people, with enough storage space).
Re: SUV’s and the demise of American Cars
Here’s a postulate I’m just going to throw out there, but I don’t necessarily think it’s true (but maybe there’s something to it):
The reason that family cars aren’t cool is that families aren’t cool.
Could it be that our culture treats families as being fundamentally uncool now? How many family shows are on TV now? And of those, how many of them aren’t crap?
The last good family show I can think of off-hand is the Cosby Show. It was a truly good show that was good, regardless of whether you had kids or were one. Since then? Everybody Loves Raymond was also a good show, but it wasn’t really a family show per se, even though it dealt with a family.
This is a bit of a stretch, but perhaps this is why jackass parents are giving their three year old mohawks. They want their kids to be “cool.”
I dunno. Random thoughts.
– Mike
Re: SUV’s and the demise of American Cars
100% agree.
We’ve become a culture where children aren’t accounted for as children anymore, and where adults are supposed to act like they’re in their 20’s until they’re ready for a nursing home.
This may be off-track, but stick with me.
Drake recently got into Superman. He saw part of the Christopher Reeve movie (the first one) and he was hooked. But as I was watching the movie with him, it struck me how inappropriate the film was for kids. Some of the Ned Beattie/Gene Hackman slapstick was obviously put in for kids, but there are some very complex points for little ones. The other movies are even less child-friendly. Even the more recent cartoons have been targetted more to the 18-34 demo.
Researching the info, I finally hit on a DVD of cartoons that fit the bill perfectly: cartoons even a 2 year old could watch. They had nice, simple stories and plots meant to keep the attention of children.
He loves it.
The hitch? These are cartoons that aired in 1941 as film serials.
I mean, this is Superman. It isn’t like it’s an obscure character. Lately, his comic books have been on the wane for sales. The character isn’t as popular as some of the more complex/conflicted/mature heroes on the market. Why? Because he doesn’t work for a mature audience: they way they keep trying to portray him.
Unlike most, I actually liked the Superman Returns movie, but it still reflects what I think is a sorry trend in children’s fiction.
I’m not saying that culture in the 40’s or 50’s was some kind of ideal to aspire to, but I do think this aspect of not accounting for or respecting the concept of a family is counter-productive for many reasons: one of which is this weird trend of marketing against reality. “Look! It isn’t a family car! I mean, it is, but it’s so much cooler!”
Family cars used to be pretty cool. The Town & Country/Country Squire wagons of the 70’s? Cool. The ’46 Ford wagon? Really cool. So what happened?
Re: SUV’s and the demise of American Cars
That is interesting. So, what’s happened? This will require some more thought.
But, in the meantime, what are cool family cars?
Chevy Nomad
Chevy Biscayne
Original VW Bus
All Saabs
Chevy Impala (original and 94-96 9C1 variant)
Volvo Amazon
Ford Cortina
Fiat 128
Morris Mini
Ford Galaxy 500
’70s Ford Escort
’63-’64 Buick LeSabre
Oldsmobile 88 (late ’60s)
Fiat 500
Peugot 404
Citroen DS
Chrysler 300 (all, including the modern one)
Pontiac Bonneville (’70s)
Hudson Hornet
Studebaker Commander
Chevy Bel Aire
Nissan Altima (new)
Alfa Romeo Berlina
Chrysler New Yorker (3rd Generation “Forward Look”)
Ford Falcon
Pretty long list, but look at how swayed it is to the ’60s. Only the Nissan Altima, Chrysler 300, and Saabs are current vehicles.
Care to add?
– Mike
Re: SUV's and the demise of American Cars
Well, my knowledge of cars in general isn’t as good as yours (and my knowledge of cars sold outside the US is almost non-existent), but here goes…
I’d add the new Taurus (the original was truly popular, but I don’t know if it fits under the category of “cool”–by contrast, the new Taurus trumps it in the cool department).
Also, the Ford 500 was a great ride (I know the new Taurus is a replacement for the 500, but the 500 was roomier and looked better). Visually, I thought the Pacifica was a cool-looking car, but I know it had some of the worst sales last year.
Also, I think the Subaru Outback had its day in the sun as far as popular family cars go. And I don’t think I’ve ever heard a bad thing about it from anyone I know who’s ever owned one. May now be classified as a “crossover”, but it’s a wagon as far as I’m concerned.
Some others:
Buick Roadmaster
’53 Plymouth Cranbrook (designed for hats!)
All the 40’s wagons (particularly Plymouth and Ford)
mid-60’s Lincoln Continental (may be considered a luxury car, but it’s really cool…and 4 door)